City considers implementing 'hotel tax' in Toronto

Mayor John Tory confirmed Thursday that he has had discussions with the premier about implementing a 'hotel tax' in the city.

With the city hungry to find new revenues, Tory's office told CP24 that the mayor is considering the tax as part of a "whole suite of revenue tools."

"We are exploring a number of options to enhance the city’s revenues to pay for much needed services, whether it is transit or housing," said Tory, who is currently in Winnipeg for the Big City Mayors’ Caucus.

The "good news" about the tax, Tory added, is that for the most part it is paid for by people visiting the city and not residents.

"It is a modest tax. Most other cities have one. We have a voluntary one that only applies to about half of the hotels so we are at least exploring whether we take it to all the hotels and have it serve a broader purpose for City of Toronto services," the mayor added.

At the moment, hotels in the city have the option of participating in the “Destination Marketing Program,” through the Greater Toronto Hotel Association.

The program collects a portion of monthly room revenues through the association, which then gives the money to Tourism Toronto for destination sales and marketing.

The program is voluntary and it is not clear how much of the cost is passed on to consumers.

In contrast, a hotel tax would apply to all hotels and would likely be used to fill city coffers for general use rather than programs that would specifically benefit the hotel industry.

Speaking with CP24.com Thursday, Greater Toronto Hotel Association CEO Terry Mundell said Toronto’s hotel industry is already burdened by some of the highest property taxes in North America.

“It’s a very expensive jurisdiction,” Mundell said. “We don’t have much room to absorb another tax that makes us anti-competitive.”

He said hotels in the city already pay anywhere from $2,500 to $11,000 per room in annual property taxes, totaling some $145 million in 2015. He said that Tourism Toronto also received $19 million from the industry last year through the Destination Marketing Program.

He said if hotels in Toronto get more expensive, they may become too costly to successfully bid on music, sporting and business events.

He also questioned whether a new hotel tax would apply to Airbnb rentals, where owners only pay residential property taxes rather than commercial.

In order to implement a hotel tax, city council would need the provincial government to amend the City of Toronto Act.

Tory’s office was quick to add that no decision had been made on the subject and council would be dealing with it at this month’s meeting.

"The bottom line is we have to take steps to be more efficient in the way we run the government and to take a look at providing for the revenues we need to build transit and to build housing, which are two things people say we must do and I agree with them," Tory concluded.

Photos

The Fairmont Royal York Hotel is shown in a file photo. (CP PHOTO/Aaron Harris)